Software firms remain positive about Europe

Senior executives in internationally dynamic software firms say that the current economic crisis will not significantly affect their European business models, according to The Software Report 2009.

Dublin is the most positively perceived European location; the South East, London, Ile de France, West Nederland, Bavaria and Stockholm are considered to be the strongest cost/quality options for locating a European software facility. Northern Ireland has been the most successful regional location for software development centres between 2001 - 2008.

The report, by FDI consulting and research specialist Oxford Intelligence, sheds light on the European business development strategies of software firms. "Software continues to be a prime source of FDI into Europe, but 2009 will see a continued decline before recovery begins in 2010" said Michel Lemagnen, Research Director, Oxford Intelligence.

CEOs of international software companies say they are finding it harder to meet their growth targets and competition is more intense with consequent pressures on pricing and profit margins. Cost factors are likely to become more important in location selection. "Operations in non-profitable markets could be relocated into centralised European sales functions or even shut down in the case of in-country offices", added Lemagnen.

In 2008 the number of software FDI projects into Europe declined by 17 per cent, with the US falling by around 32 per cent. The decline has mainly hit sales and marketing investment whilst R&D projects have been more resilient - a positive indicator of the role Europe continues to play as a location for high-end, new development work.

Oxford Intelligence forecasts an 11 per cent decline in software FDI deals in Europe in 2009 and a modest growth of five per cent in 2010, led by the UK, which will be the first to benefit from the upturn. Companies are increasingly looking at a broader set of European locations in particular for software development centres. The drivers behind this are three-fold: market growth potential in emerging markets; the search for talent in relation to technical software development skills; and Costs.

"Software is growing at a faster rate than the IT market - executives are generally optimistic about future European strategies and it's a positive sign that 88 per cent see their preferred method of expansion as organic business growth" Lemagnen added

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